PM talks up her economic credentials

The National Press Club is undergoing major renovations so when Prime Minister Julia Gillard wanted to give a major speech in Canberra on Monday, the club decamped en masse to the Gandel Hall at the National Gallery of Australia.

Returning to Parliament House from the Gallery by minibus, press gallery journalists engaged in their usual laconic and cynical banter, bemoaning a continuing lack of detail in the prime ministerial speech about the government’s plans for implementing the Gonski education plans.

“I believe the children are our future," someone crooned, channelling Whitney Houston as they reflected on a speech long on sentiment but short on financial detail.

But marking down the speech for its lack of such financial detail on education reforms missed the elements that may be much more significant for the government’s fortunes, and indeed for those of Gillard.

For the speech saw the prime minister take the reins in the battle over economic credibility, and laid out some important markers for where she next tries to take that debate.

Gillard told the crowd at the National Gallery that the additional $6.5 billion a year needed for the Gonski reforms would “require some tough budget choices, for all levels of government".

“I am prepared to make those choices but I want the Australian people to understand that today I am asking them to support not just our goals for school improvement but the tough budget choices that go with that," she said.

“Governing is and has always been about setting priorities – and I want to make very clear this is not just one of my priorities, but one of the country’s priorities."

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She pointed to a range of tough decisions the government had “already made to fund our Labor priorities", which included measures like getting rid of the dependent spouse tax offset, and slashing tax concessions on super for high-income earners.

However, she failed to list a wide range of other measures the government has taken, which have toughened up access to income support for single mothers and low-income groups.

The government until now has been much too cautious in flouting its tough decisions, seemingly terrified to point out to people that they might be losing government assistance.

But since coming to office, Labor has also capped and indexed the baby bonus, changed income tests for family benefit, broken the indexation link between family benefits and the pension, and tightened income definitions for means-testing of a range of policies including salary sacrifice and superannuation.

It has also forced single parents back into the workforce when their children go to school, or even earlier, rather than when they finish their education at school, as well as toughened up eligibility requirements for the disability support pension. There will have to be not just a lot more tough decisions but a greater preparedness to portray them that way in the future.

At the National Gallery, Gillard presaged a shift to selling reforms as choices to be made by the community from a tight purse, rather than changes the community would be compensated or bribed to accept.

The question of whether Gillard – a prime minister leading a government that is battling for its political life – fully grasps and runs with this shift in political tactics could be the difference between giving Labor a slim hope of surviving the next federal election or being wiped out.

It is also a question that is vital for a country facing the prospect of a slowing economy coupled with big decisions about boosting its productivity. It is the Coalition that leads polls on who Australians trust with the country’s economic management, despite the benign economic conditions and better comparative international performance of the past five years and despite the Coalition’s continuing failure to spell out its budgetary plans.

But if Gillard can turn budgetary necessity into a virtue, she has the chance to attack the Coalition’s lead on the issue of economic management.

The biggest obstacle standing in her way is timing.

At present, all the public sees is commitments from the government to new, long-term, not clearly defined and very expensive programs like the national disability insurance scheme and the education agenda.

If Gillard can persuade voters in the next few months that she really is prepared to take tough decisions to fund such schemes and maintain overall fiscal discipline, she may just change the discussion about the viability of reforms and Labor’s economic record.

She will also have the chance to put pressure on a Coalition that is intent on not exposing its policy decisions until the very last weeks of an election campaign.

Some cabinet sources are contemptuous of the idea that the government will be, or even should be, in a position to demonstrate that it can fund the huge cost of Gonski reforms when it releases the mid-year review of the budget (MYEFO), probably in November.

Why on earth, the argument goes, would the government reveal its hand to the states before it even enters negotiations with the states and territories on Gonski?

There are too many variables at work in the budget bottom line – changing economic circumstance, changing revenue figures – to allow the government to identify a pot of money that could be set aside for Gonski.

Perhaps. But if Gillard is starting a conversation about the sorts of things she wants to spend money on, she must also start talking about things she wants to save money on.

Waiting until the May budget next year leaves it to just weeks before a federal election.

In the meantime, Gillard will once again leave herself exposed to months of questioning about the budgetary credibility of her plans.

That will only give grist to the Rudd camp, which continues to loiter, convinced that a change of Labor leadership is only a couple of bad polls away and which will inevitably ramp up the pressure in the remaining seven parliamentary weeks of 2012.

The past week saw the release of the June quarter national accounts, recording growth at levels that are still the envy of the rest of the developed world.

Treasurer
Wayne Swan
cast them as confirmation that Australia had enjoyed an unrivalled 21 years of economic growth unmatched by any other developed economy.

But the figures still showed growth in the quarter running at less than half the rate of the March quarter, and in the past week iron ore prices continued to tumble to levels that threatened some of the mining industry’s more optimistic forward estimates.

Given subsequent data, it is hard to believe the GDP numbers were documenting anything other than the passing of the top of the boom.

If the economy is slowing, it changes the political game but, once again, not necessarily to Labor’s cost.

A slowing economy offers the spectre of lower interest rates and even a lower Australian dollar taking pressure off the non-resources sectors of the economy.

As long as the slowing is not precipitous, the economic risks may easily be limited to what happens to the employment market.

And who is it that is talking loudest about big job cuts? That’s right: the federal Coalition, which says it will get rid of 12,000 jobs in the public service.

In Queensland, Health Minister
Lawrence Springborg
foreshadowed on Friday that 2700 jobs would go in the health sector.

The coming week’s Queensland state budget is widely tipped to cut overall numbers by 20,000.

Opportunity lies waiting for a politician with the courage to pursue this.

However, it is not clear whether the whole Gillard cabinet is really attuned to the possibilities of taking the prime minister at her word in Monday’s speech, or to the narrow window of time in which to act.

Tony Abbott
now has internal problems to deal with in the form of the Nationals and foreign investment policy.